3. Budgets a) Prepare an analysis of cash requirements for the following: Purchases for the year for BBCCs most costly source of direct ingredients vanilla flavouring. Base this on the 20X8 forecast sales, the budgeted costs for BBCCs three products and BBCCs paying habits in Exhibit 8. Note: Show all supporting schedules and calculations include production budget, direct material usage budget vanilla, direct material purchase budget vanilla and cash disbursement schedule for vanilla purchase. Round quantities to litres. Cash requirements for the systems upgrade. Base this on the budget provided in Table 4 in Exhibit 8 and the consultants estimated payments as outlined in the exhibit. Prepare a quarterly cash budget.

b) Comment on cash requirements. Consider that BBCC attempts to keep enough cash on hand per quarter to deal with a maximum cash flow demand of $23,000 for these direct ingredients purchases. Consider how much more cash BBCC will need to have on hand to cover the maximum cash flow demand during a quarter for the information technology project.

Exhibit 8 Cash budget To compensate for this, a cash requirements budget for the coming year would be useful. The information is below. Production and cash requirements The following tables provide the details required to prepare the production and purchases budget for 20X8. Additional information is as follows: BBCC's accounts payable payment policy is to pay 80% of purchases in the quarter purchased and the remainder in the quarter following purchase. When planning for ending chocolate bar inventories, the company's policy is to have 7% of the next quarter's sales available on hand at the end of the quarter for The- Bar and Alamonde. Because Salt-Lick is made to order, no ending inventories of bars are kept. Also, it plans to have 9% of next quarter's estimated ingredients requirements on hand at the end of the quarter for all products. Table 1: Sales forecasts for 20X8 and the first half of 20X9 Quarter The-Bar Alamonde Salt-lick Total 20x8 Q1 180,400 118,800 66,000 365,200 20X8 Q2 187,000 123,200 69,300 379,500 20X8 Q3 206,800 134,200 77,000 418,000 20X8 Q4 178.200 116,600 68,200 363.000 20x8 totals 752,400 492,800 280,500 1,525,700 20X9 Q1 188,600 124,200 69,000 381,800 20x9 Q2 193,200 127,650 70,150 391,000 Table 2: Ending inventories and last-quarter ingredients purchases The-Bar Alamonde Salt-Lick 12,628 8,316 Sugar Vanilla Almonds 482 kg 29 litres 23 kg Fourth-quarter 20x7 purchases Sugar Vanilla Almonds $3,800 $23,000 $2,500 Table 3: Budgeted costs of ingredients (per 1,000 bars) Ingredients Price Chocolate liquor $5.50 per kg Cocoa butter $6.00 per kg Cocoa powder $1.15 per kg Cane sugar $0.70 per kg Emulsifier $0.80 per kg Vanilla $70.00 per litre Almonds $10.00 per kg Himalayan salt $5.50 per kg Other 0.08 per bar Total cost of ingredients The-Bar $ 192.50 79.80 8.05 9.31 0.48 56.35 0.00 0.00 80.00 $ 426.49 Alamonde $ 192.50 79.80 4.83 9.31 1.12 49.00 21.00 0.00 80.00 $ 437.56 Salt-Lick $ 161.70 54.60 8.05 14.46 0.56 98.00 0.00 9.63 80.00 $ 426.99 Table 4: Budgeted costs for systems upgrade Alan has been working with an outside computer consultant in relation to an upgrade to BBCC's information systems. The purpose of this systems project is to do the following: Integrate information systems between the cocoa bean and chocolate bar divisions. Upgrade BBCC's software to a mid-range ERP2 (enterprise resource planning) system. Table 4: Budgeted costs for systems upgrade Alan has been working with an outside computer consultant in relation to an upgrade to BBCC's information systems. The purpose of this systems project is to do the following: Integrate information systems between the cocoa bean and chocolate bar divisions. Upgrade BBCC's software to a mid-range ERP2 (enterprise resource planning) system. The consultant has prepared the following budget for the project: Project Budget PROJECT: Networking and software upgrade Cost by development phase Hours/unit by development phase Chargeout Implemen Total rate/hour Analysis Design tation hours unit or unit cost Total by cost category Analysis Design Implementation Total cost Cost categories Labour Project manager Application customization and implementation End user training Process analysis and development 256 40 50 110 224 100 180 250 136 35 176 120 616 $ 175 $ 406 $ 480 $ 653 $ 167,168 $ 146,272 $ 369 $ 14,760 $ 36,900 $ 398 $ 19,900 $ 71,640 $ 301 $ 33,110 S 75,250 $ $ 234,938 $ 330,062 $ 88,808 $ 12,915 $ 70,048 $ 36,120 $ 207,891 $ 402,248 64,575 161,588 144.480 772.891 $ 772,891 Hardware Servers 3 3 $ 156,500 $ S 469,500 $ 469,500 1 $ $ Network connections (equipment and telecommunications) Network connection fees Hardware maintenance contract 1 1 $ 85,400 1 $ 2.500 1 $ 10,000 $ $ 85,400 $ - $ 2,500 $ $ - $ 87,900 $ $ $ $ 1 85,400 2,500 10,000 567,400 $ 10,000 $ 479,500 $ 567,400 Software Application software licence fees Application maintenance contract 1 GA $ 1 $ 25,000 1 $ 13,000 1 $ $ $ 25,000 $ - $ $ $ 25,000 $ 13,000 $ 13,000 $ 25,000 13,000 38,000 $ 38.000 Testing Testing 20 144 600 764 $ 100 $ 2,000 $ 14,400 $ 60,000 $ 76,400 $ 76,400 Reserves (10% of total estimate) Total project cost estimate $ 23,694 $ 45,736 $ 260,632 $ 503,098 $ 74,739 $ 835,130$ 144.169 1,598,860 144.169 1,598,860 The consultant will bill BBCC quarterly using the following completion rates. The amount is considered due at the end of each quarter for the year. Note that hardware and software costs are billed in total at the beginning of the phase they are implemented. All other costs are based on percentage completion of the phase. January February March April May June July August September October November December Analysis 25% 35% 50% 60% 75% 85% 85% 85% 90% 95% 100% YTD % completion Design Implementation 0 0 10% 0 20% 0 25% 30% 0 40% 10% 45% 20% 50% 25% 60% 40% 70% 50% 80% 60% 100% 75% The cash budget should account for these costs as billed by the consultant. Exhibit 8 Cash budget To compensate for this, a cash requirements budget for the coming year would be useful. The information is below. Production and cash requirements The following tables provide the details required to prepare the production and purchases budget for 20X8. Additional information is as follows: BBCC's accounts payable payment policy is to pay 80% of purchases in the quarter purchased and the remainder in the quarter following purchase. When planning for ending chocolate bar inventories, the company's policy is to have 7% of the next quarter's sales available on hand at the end of the quarter for The- Bar and Alamonde. Because Salt-Lick is made to order, no ending inventories of bars are kept. Also, it plans to have 9% of next quarter's estimated ingredients requirements on hand at the end of the quarter for all products. Table 1: Sales forecasts for 20X8 and the first half of 20X9 Quarter The-Bar Alamonde Salt-lick Total 20x8 Q1 180,400 118,800 66,000 365,200 20X8 Q2 187,000 123,200 69,300 379,500 20X8 Q3 206,800 134,200 77,000 418,000 20X8 Q4 178.200 116,600 68,200 363.000 20x8 totals 752,400 492,800 280,500 1,525,700 20X9 Q1 188,600 124,200 69,000 381,800 20x9 Q2 193,200 127,650 70,150 391,000 Table 2: Ending inventories and last-quarter ingredients purchases The-Bar Alamonde Salt-Lick 12,628 8,316 Sugar Vanilla Almonds 482 kg 29 litres 23 kg Fourth-quarter 20x7 purchases Sugar Vanilla Almonds $3,800 $23,000 $2,500 Table 3: Budgeted costs of ingredients (per 1,000 bars) Ingredients Price Chocolate liquor $5.50 per kg Cocoa butter $6.00 per kg Cocoa powder $1.15 per kg Cane sugar $0.70 per kg Emulsifier $0.80 per kg Vanilla $70.00 per litre Almonds $10.00 per kg Himalayan salt $5.50 per kg Other 0.08 per bar Total cost of ingredients The-Bar $ 192.50 79.80 8.05 9.31 0.48 56.35 0.00 0.00 80.00 $ 426.49 Alamonde $ 192.50 79.80 4.83 9.31 1.12 49.00 21.00 0.00 80.00 $ 437.56 Salt-Lick $ 161.70 54.60 8.05 14.46 0.56 98.00 0.00 9.63 80.00 $ 426.99 Table 4: Budgeted costs for systems upgrade Alan has been working with an outside computer consultant in relation to an upgrade to BBCC's information systems. The purpose of this systems project is to do the following: Integrate information systems between the cocoa bean and chocolate bar divisions. Upgrade BBCC's software to a mid-range ERP2 (enterprise resource planning) system. Table 4: Budgeted costs for systems upgrade Alan has been working with an outside computer consultant in relation to an upgrade to BBCC's information systems. The purpose of this systems project is to do the following: Integrate information systems between the cocoa bean and chocolate bar divisions. Upgrade BBCC's software to a mid-range ERP2 (enterprise resource planning) system. The consultant has prepared the following budget for the project: Project Budget PROJECT: Networking and software upgrade Cost by development phase Hours/unit by development phase Chargeout Implemen Total rate/hour Analysis Design tation hours unit or unit cost Total by cost category Analysis Design Implementation Total cost Cost categories Labour Project manager Application customization and implementation End user training Process analysis and development 256 40 50 110 224 100 180 250 136 35 176 120 616 $ 175 $ 406 $ 480 $ 653 $ 167,168 $ 146,272 $ 369 $ 14,760 $ 36,900 $ 398 $ 19,900 $ 71,640 $ 301 $ 33,110 S 75,250 $ $ 234,938 $ 330,062 $ 88,808 $ 12,915 $ 70,048 $ 36,120 $ 207,891 $ 402,248 64,575 161,588 144.480 772.891 $ 772,891 Hardware Servers 3 3 $ 156,500 $ S 469,500 $ 469,500 1 $ $ Network connections (equipment and telecommunications) Network connection fees Hardware maintenance contract 1 1 $ 85,400 1 $ 2.500 1 $ 10,000 $ $ 85,400 $ - $ 2,500 $ $ - $ 87,900 $ $ $ $ 1 85,400 2,500 10,000 567,400 $ 10,000 $ 479,500 $ 567,400 Software Application software licence fees Application maintenance contract 1 GA $ 1 $ 25,000 1 $ 13,000 1 $ $ $ 25,000 $ - $ $ $ 25,000 $ 13,000 $ 13,000 $ 25,000 13,000 38,000 $ 38.000 Testing Testing 20 144 600 764 $ 100 $ 2,000 $ 14,400 $ 60,000 $ 76,400 $ 76,400 Reserves (10% of total estimate) Total project cost estimate $ 23,694 $ 45,736 $ 260,632 $ 503,098 $ 74,739 $ 835,130$ 144.169 1,598,860 144.169 1,598,860 The consultant will bill BBCC quarterly using the following completion rates. The amount is considered due at the end of each quarter for the year. Note that hardware and software costs are billed in total at the beginning of the phase they are implemented. All other costs are based on percentage completion of the phase. January February March April May June July August September October November December Analysis 25% 35% 50% 60% 75% 85% 85% 85% 90% 95% 100% YTD % completion Design Implementation 0 0 10% 0 20% 0 25% 30% 0 40% 10% 45% 20% 50% 25% 60% 40% 70% 50% 80% 60% 100% 75% The cash budget should account for these costs as billed by the consultant